Outsourcing Facilities Management

Penn and the real estate property management firm of Trammell Crow Company
have signed a "letter of intent" that by March would outsource
the management and operation of three units of the University-Facilities
Management, Residential Operations, and Penn's wholly owned real estate
subsidiary, University City Associates. About 180 Penn managers and support
staff (A-1s and A-3s) are affected, but the contracts of those in collective
bargaining agreements are not.

President Judith Rodin announced the signing of the Letter
of Intent in a news
release issued Wednesday by Trammell Crow Company. The release was issued
within hours of a meeting at the Faculty Club where Executive Vice President
John Fry described the intent to the managers and staff. The president of
Trammell Crow Corporate Services, Bill Concannon, also spoke to the group,
indicating that all present staff will have an opportunity to be interviewed
by the firm. Mr. Fry projected that "a significant majority" of
the staff will be placed there, based on other such transitions conducted
by Trammell Crow-whose normal mode of operation on taking on a contract
is to employ client staff. The firm has a strong internal training program,
and a retention rate of about 95%, Mr. Fry added. Predicting that some Penn
staff may take retirement packages, he said that for all others not moving
to Trammell Crow-whether because they choose not to be interviewed, choose
not to accept an offer, or do not receive an offer-the University's Policy
on Position Discontinuation and Staff Transition will
apply. Arthur A. Gravina, Vice President for Facilities Management until
the announcement, Wednesday, will serve on a transition team along with
Omar Blaik, associate vice president for facilities management, and an newly
named Interim Chief Facilities Officer, Lawrence R. Kilduff, Jr., of Columbia
University, where he was vice president 1987-93, and acting EVP, 1993-94.

The outsourcing does not affect "residential service" areas, such
as dining and program-related services which report to Business Services
Vice President Steve Murray, Mr. Fry said. Nor are any union staff involved
in the transfer: "Where collective bargaining agreements are in force,
the University will honor its obligations under existing collective bargaining
agreements and its obligations to labor organizations under the National
Labor Relations Act," Wednesday's news release said.

Some 105 of the affected employees are in Facilities Management, which has
the major all-University divisions such as Physical Plant (which handles
building maintenance and groundskeeping), and Facilities Planning, where
architectural and landscape design, and liaison to outside architects, are
lodged. Another 37 are in Housing Services, which until recently came under
the VPUL. And 38 are in University City Associates (UCA), the subsidiary
that manages Penn commercial real estate on and off the campus.

UCA is already operated under contract with Trammell Crow Corporate Services,
whose representative John Greenwood has managed the unit for more than a
year, Mr. Fry said. "That is one of the reasons we looked at Trammell
Crow for the larger role," he added. "I would not have recommended
this transition if the firm had not impressed me with its efficiency and
its employment policies. I believe they will value our people and give them
new opportunities to grow professionally." Some terms of the transition
would be, for employees who make the transition to Trammell Crow:

-- a salary at least the same as the present one;
-- eligibility for an incentive bonus-typically 5% to 10% of salary;
-- a benefits package that differs from Penn's but would include:-- an increment to base salary equal to any out-of-paycheck loss
related to medical/dental plans;-- some extension of Penn tuition benefits at least through Spring
2001 ("at a minimum--and I stress that it is the minimum,"
said Mr. Fry);-- continued access to recreation facilities, libraries, parking,
Faculty Club membership, and other campus activities.

$32 Million to Penn: Under the proposed ten-year contract, Penn
would pay Trammell Crow $5.25 million/year for its services-but, Mr. Fry
added, the firm would pay Penn $32 million ($26 million up front and another
$6 million at the end of the first five years) for "providing this
opportunity to enter the higher education market in a leadership position."
Trammell Crow Corporate Services, Inc., a division of the Dallas-based parent
company, has operated some of the largest facilities in the country, Mr.
Fry explained, but Penn represents its first entry into higher education-and
it has created a new subsidiary, Trammell Crow Higher Education Services
Inc. (TCHES), in order to make this entry. A condition of the arrangement
is that TCHES will establish its Northeastern headquarters in University
City, at a site to be determined. The headquarters unit is expected to create
some 30 jobs.

In effect, Mr. Fry said, the Penn contingent who join Trammell Crow will
form the core of a new TCC division that will provide facilities management
and real estate services to many colleges and universities rather than just
one. "Trammell Crow respects our facilities people, and if they can
hire many of the Penn people, that is a body of expertise it would take
a long time to build."

Penn's track record in Facilities Management is one of the best in the country,
Mr. Fry said-looked upon as a benchmark by other institutions, which often
send representatives often to see "how Penn does it." Reasons
he gave for the decision to outsource, given that track record, were the
complexity of operations here, with related operations in the three separate
divisions; a perceived need for more coherency in the cost of, and cost-information
on, services provided to the schools and centers; and a sense of "
a need to look outside for new ideas and techniques." Penn is also
entering a phase of physical planning and development that has more commercial
ramifications than ever before, he added, citing the construction of Sansom
Common, the projected renovations of residential facilities, and continued
development in areas such as 40th Street.

Next Steps: A rough timetable for the outsourcing project calls
for drafting the definitive agreement for Trustee approval at the upcoming
stated meeting of the full board (November 6-7). Job interviews for the
175 employees are being scheduled for November 10 through November 25. Job
offers are to be made by December 5, and those receiving offers will have
until December 12 to return their decisions. The target for implementation
is March 1.

Meanwhile, Trammell Crow representatives have been giving follow-up presentations
to affected staff; a series of 20 focus groups is being scheduled to explore
campus facilities management and related needs; and an e-mail hotline has
been established at evp@pobox. upenn.edu
"for members of the University to express their opinions and concerns,
and to offer comments and suggestions."

(For complete texts of the TCC news release, and of the Letter of Intent
it summarizes, please open Almanac Between Issues at www.upenn.edu/almanac/).

Residential Communities

"At Penn," said Provost Stanley Chodorow, "the Century
will begin in September 1998." That is the launch date for a new program
that incorporates all of Penn's undergraduate residences into a system of
12 College Houses, and eventually brings to all of them what has been a
pilot project in academic support known as "The Wheel" (right).

Each house is to have common spaces, dining and study areas, and expanded
staffing including a house dean. Launching of the house program is also
the first phase in a longer-term plan to renovate the residences.

College Houses in the 21st Century

Provost Stanley Chodorow announced last week the
details of the 21st Century College House program as a component of Penn's
Agenda for Excellence "designed to strengthen the University's undergraduate
residential system by providing an integration of students' residential,
intellectual, cultural, social and recreational life at Penn." The
program, produced by the Residential Communities Working Team led by Dr.
David Brownlee, is outlined in the Team's
final report in this issue.

It calls for the creation of 12 residential
communities encompassing all of the present undergraduate residences. (Please
see page five for the configuration.):

-- An expansion of the "Wheel" Project
into all the residences. (The 21st Century Wheel Project, sponsored by the
Residential Faculty Council with undergraduate schools and departments and
the office of the VPUL, introduces into residence enhanced academic support
programs in the areas of mathematics, writing, information technology, library,
research, and languages.)

-- Enhanced staffing (each house to have a faculty
master, faculty fellows, dean, and student peer support including graduate
associates, and resident advisors).

-- Study centers, including computer and seminar
rooms, office spaces, social and multipurpose facilities, in each house.

-- A dedicated dining facility for each house.

Freedom of choice is an important feature of the
plan, Dr. Chodrow said: There is no mandatory residency requirement and
no mandatory dining provisions are imposed. Undergraduates will continue
to have a full range of housing options including Greek houses and off-campus
housing. They will also be able to transfer among the college houses.

"It is expected, however, that the increased
amenities and heightened sense of community of the college houses will attract
growing numbers of students to multi-year residences on campus," Dr.
Chodorow added. "Those who move into off-campus housing or fraternities
will retain their college house affiliations and will be able to continue
using college house services and programs."

Programming and themes will be defined and executed
by the residents, offering undergraduates, graduates, and faculty the opportunity
to work collaboratively on academic and non-academic projects of common
interest, supported by a new infrastructure of facilities and services.

The project is considered the first phase in a
longer-term capital plan to renovate and rehabilitate the residences, but
the Provost and EVP John Fry project that little construction will be needed
to launch the programand that most of the projected increase in annual operating
costs will be paid for by efficiencies derived from the restructuring of
Penn's residential service divisions.

First-year capital costs associated with the project
are estimated at $700,000, to be funded through the established annual budget
for the residences. Reallocation of existing resources is expected to reduce
additional personnel and program expenses from over $1 million per year
to $680,000. By extending the present $70 program fee across the residences,
costs are further reduced to $525,000.

"Student, faculty and staff input will continue
to be essential as the plan is put into place during the next year,"
Dr. Chodorow emphasized. "New and existing house councils, work groups
and residential student and faculty leaders will shape the new system. In
the immediate future, transition teams will be established for each College
House to begin shaping the development of the houses, address house constitutional
issues, space issues and marketing strategies, among others. Finally, the
Wheel Project will be extended into each house, and dining and facilities
recommendations will be implemented."